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Article from Issue 220/2019

Noncompete agreements have been around for years, but they seem to be experiencing a surge in popularity. Employers love noncompete agreements because they reduce the power of the employee to bargain for higher wages. Interestingly, noncompete clauses should really be anathema to both so-called conservatives (because they interfere with competition) and so-called liberals (because they diminish the rights of workers), but they seem to have taken hold throughout the developed world, and most governments appear unwilling to confront the problem in a comprehensive way.

Dear Reader,

Noncompete agreements have been around for years, but they seem to be experiencing a surge in popularity. Employers love noncompete agreements because they reduce the power of the employee to bargain for higher wages. Interestingly, noncompete clauses should really be anathema to both so-called conservatives (because they interfere with competition) and so-called liberals (because they diminish the rights of workers), but they seem to have taken hold throughout the developed world, and most governments appear unwilling to confront the problem in a comprehensive way.

To be fair, noncompete agreements do have a purpose in this world. A company might make a huge investment in finding an upper-management exec, who is well compensated for any contract restrictions and whose departure could truly make chaos for corporate strategy. Sales staff sometimes have access to customer lists and other valuable information that the company has an interest in protecting from competitors. But the use of noncompete agreements has spread well beyond these special cases. A recent article in Bloomberg [1] quotes a 2014 study [2] that found nearly one in five workers in the US were bound by noncompete agreements, including in jobs such as camp counselors, night watchmen, and other gigs where the clause serves no constructive purpose other than to take power away.

[...]

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